As lawmakers convene for a special session that could last almost two weeks, five groups have coalesced over dealing with an impending deficit for next fiscal year’s budget. The expiration of temporary taxes, most prominently a one cent levy on sales, at the end of this fiscal year means current spending patterns exceed expected existing revenues by almost $1 billion.
A small group of Republicans don’t want to see any restoration of temporary taxes, much less new permanent ones, and hope a combination of efficiencies and user fees, plus revenue boosts from federal tax changes, make up the difference. Their opposite number of Democrats, also few, want to see only permanent income tax increases focused on corporations and on those individuals above lower-income status.
Another grouping of Republicans as the only option will allow some portion of the cent to continue temporarily, buying time for genuine fiscal reform to brew. The last two appear as the only ones with substantial bipartisan membership, one of which would remove exemptions in the existing sales tax on a permanent basis in exchange for jettisoning the extra cent while another would keep a portion of the penny permanently with lopping off exceptions.
Making convergence more difficult, the Constitution requires that any new/renewed tax, which includes stripping of exceptions permanently, must receive two-thirds support in each chamber. This can create interesting dynamics, for any combination of two groups in the House likely would contain enough members to constitute more than a third of the membership to deny other options. (With the pox-on-all-taxes GOP faction in the Senate essentially nonexistent, consensus there should not pose as nearly a problem as in the House.)
Thus, working on the sales tax seems the path most probable to gain consensus, with questions revolving around whether to go with a temporary bridge or a permanent scrubbing of exceptions, or a combination. But troubling signs for House Republican discipline have emerged that could tip the balance in favor of permanent tax increases.
One comes from an expected corner, that of perhaps the most pro-big government Republican in the House, state Rep. Rob Shadoin. His HB 13 would raise income taxes for those above the lower-income level, and his HB 22 would eliminate certain corporate income tax deductions.
Conservatives can’t chalk this effort up as a mere nuisance in light of what happened during the second special session of last year. Poised to roll back government spending by sequestering a small portion of budget authority to act as a buffer in case of negative fiscal surprises, Shadoin emerged as a leader to scuttle the deal and join a handful of GOP defectors to spend to the limit as Democrat Gov. John Bel Edwards hoped.
Worse, while Shadoin – identified as one of the least friendly Republican legislators to tax and spending restraint in a legislative scorecard put out by the Louisiana Association of Business and Industry – predictably would make such a move, a few of the friendlier GOP representatives to limited government identified by LABI joined him. A repeat performance on these bills would doom fiscal restraint.
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And there’s a less virulent House bill that might have a greater chance of catching the handful of GOP defectors necessary to impose permanent tax increases. Republican state Rep. Stephen Dwight – another LABI-identified legislator on the spectrum opposite from Shadoin – has introduced HB 23 that would impose a permanent half-cent increase plus excise some exemptions. Again, it’s a bad sign when normally fiscally-prudent lawmakers seem willing to lock in permanently inflated government.
If his sympathies lie with right-sizing state government, Republican Speaker Taylor Barras will face a stiff challenge to keep renegade GOP representatives from backing Democrats’ efforts to sabotage this desire. Louisianans must hope he can do so.